Sheila Bair: Timothy Geithner Did 'What Citigroup Needed'

Former financial regulator Sheila Bair says that Treasury Secretary Timothy Geithner was primarily concerned with shoring up Citigroup and other banks in his response to the financial crisis, rather than holding those banks accountable.

"He was in constant communication with [Citigroup CEO] Vikram Pandit throughout that whole process, and I felt like he and Vikram were figuring out what they were going to do and then trying to jam it on me," said Bair, who served as chair of the Federal Deposit Insurance Corporation (FDIC) between 2006 and 2011. "I do think that a lot of the policy decisions that were made were made through the prism of what Citigroup needed."

Bair said that most big banks did not need the Troubled Asset Relief Program (TARP), the government's bank bailout in 2008, but the government forced TARP on all of them partly because Citigroup needed it. "It worked horrible reputational damage on everyone," Bair said of TARP.

"He viewed these institutions as entities that needed to be taken care of," Bair said of Geithner, adding he thought the banks "needed to be taken care of and that this was just a big systemic event, and we needed to protect them -- whereas I wanted them to have accountability. They had caused this."

"If you view the banks themselves as victims just of the larger crisis, then you're going to just try to help them however you can, and I think that was his guiding philosophy," she added.

Geithner declined to comment to the Wall Street Journal after the interview.

This is not the first time that Bair has criticized Geithner. She told CNBC in July that the Federal Reserve Bank of New York should have done more to investigate the Libor rate-rigging scandal in 2008, when Geithner served as the New York Fed's president. "It looks like they had pretty explicit notification of some very bad behavior, and I don't understand why they didn't investigate," she said. "They did have authority to do that."

Related on HuffPost:

Close



Libor Scandal Timeline

of





Barclays allegedly began manipulating the Libor rate in 2005 and allegedly stopped manipulating Libor in 2009, according to Businessweek. But other reports indicate that Libor fixing may have spanned decades.

A Barclays employee told an analyst from the New York Fed's Markets Group that Barclays was indeed using false information to set the interest rate on April 11, 2008, according to recently released Federal Reserve documents.
"We know that we're not posting, um, an honest LIBOR," the Barclays employee told the New York Fed's Fabiola Ravazzolo, according to a transcript of the phone conversation.

In June 2008, then-president of the New York Federal Reserve Timothy Geithner sent a memo to British banking authorities expressing concern over the "integrity and transparency" of the key interest rate. Geithner did not inform British regulators that a Barclays employee admitted that Libor was being rigged, according to Reuters.

During the 2008 Financial Crisis, the U.S. government lent money to cash strapped banks and AIG using Libor to determine interest, Treasury Secretary Tim Geithner told Congress on July 25, 2012. The artificially low rate saved the banks and AIG billions, while costing tax payers the same amount.

In April 2010, then-UK Business Secretary Peter Mandelson told theTimes of London that then-CEO of Barclays, Robert Diamond, was "the unacceptable face of banking" after the bank announced that its CEO would receive a bonus of 63 million pounds, Sky News reports. Mandelson also told the Times that banking bosses were expected to act with "a bit more modesty, a bit more humility" than Diamond's behavior.

On June 27, Barclays disclosed to its shareholders that it would be fined $450 million by U.S. and U.K. regulators for conspiring to manipulate the Libor rate between 2005 and 2009, The Telegraph reports.

On July 2, Barclays announced that it's Chairman, Marcus Agius, would be resigning in the wake of the Libor rigging scandal. In the official resignation letter, Mr. Agius stated that the Libor rigging constituted "unacceptable standards of behaviour within the bank." He went on to say:
As Chairman, I am the ultimate guardian of the bank's reputation. Accordingly, the buck stops with me and I must acknowledge responsibility by standing aside."

On July 3, Robert Diamond resigned as Barclays CEO, The Washington Post reports.

On July 3, Barclays announced that Marcus Agius would be reappointed as the bank's full-time Chairman following the resignation of Robert Diamond.

On July 3, Barclays released phone records between CEO Robert Diamond and the Deputy Governor of the Bank of England, Paul Tucker, that indicate that the BoE executive encouraged Barclays to manipulate the Libor rate, The Wall Street Journal reported.

On July 4, Bob Diamond told a U.K. parliamentary panel that he believes other major banks were involved in Libor rigging, The Wall Street Journal reports. He also stated that fear of being nationalized during the 2008 Financial Crisis contributed to its actions.

Barclays CEO Bob Diamond agreed to forgo an extra $31 million bonus, the bank announced on July 10, according to the reports Wall Street Journal. Diamond will still net his salary and pension for a year, which is worth about 2 million pounds.

At least 16 banks were reportedly under investigation for Libor rigging as of July 11, according to Reuters. In an internal bank memo circulated on July 13, Barclays executive committee told employees that, "As other banks settle with authorities, and their details become public, and various governments' inquiries shed more light, our situation will eventually be put in perspective," TIME Magazine reports.

On July 25, the European Union proposed making the rigging of international interest rates a criminal offense.